Mermaid Marine (MRM)

Broker UBS has upgraded mining services company
Mermaid Marine
to a “buy" after a sharp pullback in the value of the company’s shares.

The broker had changed its rating on the stock from “neutral" to “buy", saying a recent sell-off by investors presented a buying opportunity.

As investor mood cooled towards commodities on concerns about the outlook for economic growth in China, Mermaid, which supplies services including underwater maintenance to the oil and gas sector, also felt the effect. It fell more than 20 per cent since reaching a high of $3.20 on January 11.

“Mermaid is strategically well positioned to benefit from the development of a number of oil and gas assets across the north of Australia and we have taken the opportunity to upgrade the stock due to the sell off in the share price," the broker says.

UBS expects MRM’s first half earnings figure to be strong, reflecting an increase in capital expenditure and production activity across the energy sector, estimating a pre-tax profit growth of 25 per cent.

The broker forecasts earnings to grow by a slightly lower 17.1 per cent over the second half.

UBS has increased its price target from $2.85 to $3.10 a share. At 12.57pm on Tuesday it was trading at $2.61, up 4.4 per cent.